BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Martha M. Escutia, Chair
2003-2004 Regular Session
AB 2317 A
Assembly Member Oropeza B
As Introduced
Hearing Date: June 22, 2004 2
Labor Code 3
GMO:cjt 1
7
SUBJECT
Gender Pay Equity
DESCRIPTION
This bill would increase the liquidated damages payable by
an employer to an employee for violating the
equal-pay-for-equal-work provision of the Labor Code, from
an amount equal to the pay differential to treble that
amount.
The bill would further increase the liquidated damages to
five times the amount of the pay differential, if it is
determined that the employer willfully violated this
provision.
BACKGROUND
According to the U.S. Census Bureau, in 2002, American
women working full-time, year round earned on average only
76.6 cents for for every dollar earned by full-time
working American men. A General Accounting Office report
on women's earnings shows that there exists an inexplicable
wage gap of approximately 20%, even after taking into
account work experience, education, occupation, industry of
current employment, and other demographic and job
characteristics. And, interestingly enough, the Institute
for Women's Policy Research found that recent narrowing of
the wage gap between men and women was due in large part to
men's real wages falling, rather than women's wages rising.
(more)
AB 2317 (Oropeza)
Page 2
The author also points out that minority women fare
significantly worse, and that the earnings gap, which cuts
across a wide spectrum of jobs, is equivalent to an average
loss of $4,000 in a family's annual income, an amount that
would cut the poverty rate in half.
California has prohibited gender-based pay discrimination
since 1949. While Section 1197.5 of the Labor Code started
out to redress the segregation of women into historically
undervalued occupations, it evolved, over the last four
decades, such that today it is virtually identical to the
federal Equal Pay Act (29 U.S.C. Secs. 206(d).).
CHANGES TO EXISTING LAW
Existing law prohibits employers from paying an employee at
a wage rate less than the rates paid to employees of the
opposite sex in the same establishment for equal work on
jobs the performance of which requires equal skill, effort,
and responsibility, and which are performed under similar
conditions. Existing law provides an exception to this
prohibition, where payment is made pursuant to a seniority
system, a merit system, a system which measures earnings by
quantity or quality of production, or a differential based
on any bona fide factor other than sex. [Sec. 1197.5(a).
All references are to the Labor Code, unless otherwise
indicated.]
Existing law provides that an employer who violates Section
1197.5 by neglecting to comply is guilty of a misdemeanor
punishable by a fine of not less than $100 or by
imprisonment for not less than 30 days, or both. [Sec.
1199.]
Existing law provides that an employer who willfully pays
wages to one employee less than that paid to an employee of
the opposite sex as required by the
equal-pay-for-equal-work provision, or who willfully
reduces pay of one employee in order to comply with the
equal-pay-for-equal-work provision, is guilty of a
misdemeanor punishable by a fine of not more than $10,000
or by imprisonment for not more than six months, or both.
[Sec. 1199.5.]
AB 2317 (Oropeza)
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Existing law provides that an employer is liable to the
affected employee for the amount of the wages, and interest
thereon, that the employee loses by reason of the
violation, and in an additional equal amount as liquidated
damages. [Sec. 1197.5(b).]
Existing law provides that in a civil action, any employee
receiving less than the wage to which the employee is
entitled under Sec. 1197.5 may recover the following:
The balance of the wages, including interest thereon;
plus
An amount equal to the balance of the wages plus interest
thereon as liquidated damages; plus
Costs of suit and reasonable attorney's fees.
This amount is calculated notwithstanding any agreement of
the employee to work for a lesser wage. [Sec. 1197.5(g).]
This bill would provide that the employee shall recover the
above in a civil action and increase the recovery by
trebling the amount of the balance of wages as the
liquidated damages.
This bill would further provide that if it is determined
that the employer willfully violated Sec. 1197.5, the
liquidated damages would be an amount five times the
balance of the wages due.
COMMENT
1. Need for the bill
The author states that:
Women should be protected from this wage
discrimination occurring in our state. No
employer should pay any individual employee less
than the rates paid to employees of the opposite
sex in the same institution for equal work?AB 2317
would further impose penalties on employers who
violate this provision?In order for California to
continue its status as one of the nation's most
highly skilled workforces, it must be vigilant in
the protection of its workers.
AB 2317 (Oropeza)
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2. Employer liability in a civil action under the equal
pay provision (Sec. 1197.5)
As with other Labor Code violations, enforcement of this
provision is primarily the responsibility of the
Division of Labor Standards Enforcement (DLSE) through a
complaint procedure. However, an independent civil
action is also authorized by Sec. 1197.5.
An employer's liability to an employee in an action
pursued by the DLSE is the wage differential (between
the higher wage and the wage paid to the employee) and
interest thereon, plus an additional amount equal to
that wage differential plus interest, as liquidated
damages.
An employer's liability to an employee in a civil action
is the same as that payable in a DLSE action, except
that in a civil action, the employee may recover costs
of suit, including reasonable attorney's fees,
notwithstanding the employee's agreement to work for a
lesser wage.
This bill would provide two things with respect to the
damages payable in an employee's civil action under Sec.
1197.5.
First, AB 2317 would increase the amount designated as
liquidated damages to an amount equal to three times the
pay differential plus interest.
Second. AB 2317 would impose a liquidated damages amount
equal to five times the pay differential plus interest
if the employer willfully violated Section 1197.5.
a. Purpose of liquidated damages in Sec. 1197.5 (b)
and (g)
Liquidated damages clauses are used in contracts to
establish an amount that the parties agree would
compensate the wronged party for the other party's
failure to perform according to their contract terms.
Under Civil Code Sec. 1671, liquidated damages are a
permissible substitute for an amount that is
difficult to ascertain because the damages are
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speculative or difficult to measure. This bill would
increase the recoverable liquidated damages in a Sec.
1197.5 civil action by 300%.
The liquidated damages provision in Section 1197.5(b)
was enacted in 1982 and was attached only to the
provision that allows for recovery by an employee
through a DLSE action. In fact, except for
violations of Sec. 1197.5 (the equal pay provision)
and Sec. 1194.2 (the minimum wage provision), there
are no other Labor Code violations that call for the
payment of liquidated damages through a DLSE action
or a civil action by an employee. The liquidated
damages clause was later incorporated into the
section that established the employee's independent
civil action.
Thus, it appears that the imposition of liquidated
damages in 1982 for a violation of Sec. 1197.5
recognized that there are other damages an employee
may incur other than the pay differential and the
interest accrued thereon, but that those damages were
more conveniently recompensed by liquidated damages
that would not need any additional proof.
Since then, however, federal and state employment
discrimination laws have evolved, and compensatory
damages in many forms have become a recoverable item
in employment discrimination lawsuits.
Today, an employee alleging sex discrimination in
wages paid will probably file a complaint with the
Department of Fair Employment and Housing under FEHA
and the federal statutes that govern employment
discrimination, including the federal Equal Pay Act
of 1963, because the causes of action, while based on
identical facts, may be different and the recoverable
damages and penalties greater. Economy of litigation
costs would almost dictate that a civil action
contain allegations under all of the applicable state
and federal statutes. Additionally, the burden of
proof in employment discrimination cases have become
harmonized so that it matters not whether one sues
under state or federal law, the shifting burdens are
the same.
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b. Liquidated damages for "willful violation" would
be five times current amount
Under Sec. 1199, an employer who violates Sec. 1197.5
is guilty of a misdemeanor punishable by a fine not
less than $100 or imprisonment for not less than 30
days or both. An employer who willfully violates
Sec. 1197.5, by refusing to pay an employee of one
sex the same wages as an employee of the other sex or
by reducing the wages of an employee of one sex in
order to comply with Sec. 1197.5, is guilty of a
misdemeanor punishable by a fine of not more than
$10,000 or imprisonment for not more than six months
or both. (Sec. 1199.5)
This bill would import the "willful violation"
standard of Sec. 1199.5, which applies only when the
employer reduces the wages of a higher-paid employee
so as to comply with the equal pay provision (or
refuses to pay employees of opposite sexes equally by
raising the wages of the lower paid employee), into
the civil action available under Sec. 1197.5, but
applies it broadly to cover all situations of unequal
pay.
A liquidated damages amount equivalent to five times
the differential amount plus interest is almost
punitive in nature, since it has no connection at all
to the rationale for the original liquidated damages
amount except for the multiplier effect. Further, as
provided in this bill, there is no guidance to an
employer as to what would be a "willful violation,"
unlike Sec. 1199.5.
Here is an interesting scenario under this bill:
Employer hires a male employee and pays him $40,000
annually. Shortly after the hire, employer decides
he needs another employee to do the same work but can
only afford $36,000 annually. A female applicant
agrees to work for the lower pay. After one year, he
discovers his conscience, but still cannot afford to
pay the female employee the $40,000 being paid to
male employee. Employer tells the male employee that
he is reducing the employee's salary to $36,000.
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Both employees now can sue employer. The female
employee can file a Sec. 1197.5 civil action and
recover $4,000 plus interest, plus liquidated damages
of $20,000 plus five times the interest. The male
employee can probably sue for adverse employment
action if he refuses to take the cut in pay and he is
demoted to justify it anyway (seniority rights not
being significant enough to use the exception
provided in Sec. 1197.5 (a) notwithstanding).
The amounts recoverable under the liquidated damages
clause, which is actually more like a punitive
damages clause by now, would make a civil action more
attractive to an attorney who may be willing to take
a contingent fee in this matter.
WILL MULTIPLYING THE LIQUIDATED DAMAGES IN THE CIVIL
ACTION UNDER SEC. 1197.5 INCREASE COMPLIANCE WITH THE
EQUAL PAY PROVISION?
To conform to Civil Code Sec. 1671 and case law
precedents, it may be better to leave the liquidated
damages under Sec. 1197.5(g) untouched, but impose a
double the differential pay as a civil penalty, and a
four times the differential pay as civil penalty for
a willful violation.
SHOULD THE BILL BE AMENDED TO SEPARATE OUT A CIVIL
PENALTY FROM THE LIQUIDATED DAMAGES INSTEAD?
3. Supporters and opponents' views
Supporters of AB 2317 contend that the gap in wages
between men and women exists across a wide spectrum of
occupations and that passage of AB 2317 will provide the
necessary recourse for women who are paid unfairly.
Opponents on the other hand state that it is often very
difficult for an employer to determine when and if a
legitimate violation may have occurred. The California
Manufacturers & Technology Association states that CMTA
is concerned that in order to avoid the consequences of
this bill, private sector employers would have to adopt
a formal system similar to [a] collective bargaining
agreement or a civil servant system. "Both of these
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Page 8
systems are too cumbersome for most small to medium size
employers to use and it would add to their
administrative cost."
Support: American Civil Liberties Union; AFSCME, AFL-CIO;
Lambda Letters Project; California Commission on the
Status of Women; California Independent Public
Employees Legislative Caucus; California Conference
of Machinists; California Conference Board of the
Amalgamated Transit Union; American Federation of
Television and Radio Artists; Hotel employees &
Restaurant Employees International Union; Region &
States Council of the United Food and Commercial
Workers; Engineers and Scientists of California,
Local 20, IFPTE; Professional and Tehnical
Engineers, Local 21, IFPTE; California Teamsters
Public Affairs Council; Attorney General; California
State Employees Association
Opposition: California Chamber of Commerce; California
Manufacturers & Technology Association; National
Federation of Independent Business
HISTORY
Source: Author
Related Pending Legislation: None Known
Prior Legislation: None Known
Prior Vote: Asm. L. & E. (Ayes 6, Noes 2)
Asm. Appr. (Ayes 16, Noes 4)
Asm. Flr. (Ayes 42, Noes 27)
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